Morgan Cazenove reaps rewards from City fundraising stampede

JP Morgan Cazenove defied the gloom in the investment banking industry yesterday by reporting a 15% fall in profit and reducing its bankers' bonuses by barely 20% - considerably less than the savage cuts experienced at its rivals.

The group, created in 2004 when the City stalwart Cazenove embarked on a joint venture with JP Morgan, has reaped rewards from advising on the deluge of fundraisings by companies in the debt and equity markets.

Naguib Kheraj, the chief executive, said that while the firm could continue to act on behalf of companies racing to raise cash, the big City investors that acted as sub-underwriters to the fundraisings were now carrying so much risk that they would be unable to take on much more.

"We end up distributing the underwriting through sub-underwriting and lay it off to people who are mainly the end investors," he said.

Kheraj, a former Barclays executive who joined the group last September, noted that £20bn had been raised this year and that only smaller fundraisings - of about £300m - might be possible while the City investors digested the larger sums being raised by the likes of Rio Tinto and HSBC.

Some of the fundraisings on which JP Morgan Cazenove has advised have proved controversial. About 20% of investors voted against the terms of one such move by the miner Xstrata, while Barclays also endured a revolt over its plan to raise money from Middle East investors. Kheraj was sanguine, saying there would always be some controversy attached to such deals.

Pre-tax profit in 2008 was £134.5m, down 15%, while "variable remuneration" - bonuses - was down by 18% to £84.8m.

The group, which spun off its international operations last year to focus on the UK and move away from the US, said its core British business had experienced a rise in profits as it gained market share in all areas last year - at a time when large US investment banks were forced to retrench because of problems domestically.

Under the terms of the joint venture, JP Morgan is able to buy the remaining 50% of it next year, although Kheraj said no discussions had yet begun about this subject.

He also made it clear that the veteran dealmaker David Mayhew, whose connections span all areas of corporate Britain, had no intention of resigning.

Staff numbers in the UK were reduced by 70 to 670 last year. Kheraj played down the need for more cuts this year. "Our people are pretty busy," he said.